Philippine inflation is expected to accelerate to 7.7% in October and could exceed 8% in November as higher transport fares, wage adjustments, and a weaker peso add pressure to household expenses.

The projected October rate would be up from 7.2% in September and mark the fastest annual increase in consumer prices since February 2023.

Consumer prices are also estimated to have risen by 0.6% month-on-month in October, suggesting that price pressures remain elevated.

Why inflation may keep rising

According to the Bangko Sentral ng Pilipinas, the anticipated increase points to inflation spreading beyond food and fuel, with higher costs affecting transportation, labor-intensive services, and other household expenses.

Unlike the fuel-driven inflation spike in April, the latest pressures are being driven by factors that may be more difficult to reverse. The outlook also suggests that inflation may not have peaked, with November potentially recording an increase of more than 8% if current pressures persist.

What drove October inflation

Lower food and fuel costs provided some relief in October.

The weakening of the southwest monsoon, or Habagat, helped ease supply disruptions affecting rice, meat, fish, and vegetables. Fuel price rollbacks also helped moderate transportation costs.

However, these improvements were offset by higher public transport fares and labor expenses.

The first full-month impact of fare increases of ₱1 to ₱2 took effect after adjustments were implemented on September 28.

Meanwhile, the ₱60 minimum wage increase in Metro Manila under Wage Order NCR-28 took effect on September 26. The adjustment raised operating costs for businesses that rely heavily on labor.

Higher wages may support household spending, but businesses could also pass additional labor expenses on to consumers through increased prices for goods and services.

The weaker peso added to imported inflation by raising the cost of fuel, imported food, and electricity supply contracts denominated in US dollars.

Manila Electric Co. (Meralco) also increased its overall electricity rate by approximately 2.2% in October, following two consecutive months of reductions.

November inflation could breach 8%

Inflation could exceed 8% in November as the effects of wage and transport fare adjustments continue to filter through the economy.

These increases may be difficult to reverse and could prompt businesses to raise prices further.

Underlying price pressures are also showing signs of strengthening. Core inflation, which excludes selected volatile food and energy items, reached a three-year high in September.

Additional risks include further peso depreciation, higher electricity distribution charges following Meralco’s approved rate reset, volatile global oil prices, and possible supply disruptions linked to a Super El Niño.

Higher inflation may prompt more BSP rate hikes

The inflation outlook has strengthened expectations of further monetary tightening by the Bangko Sentral ng Pilipinas (BSP).

The Monetary Board raised its policy rate by 50 basis points to 5.50% in October and signaled that it was prepared to take additional action.

The peso’s depreciation, which reached as much as 8.4% year-to-date and saw the currency touch ₱64.170 against the US dollar, has added pressure by making imported goods and supplies more expensive.

Further interest rate increases may be needed to stabilize inflation expectations and prevent price pressures from becoming entrenched.

However, monetary tightening alone may not be enough to address the factors driving prices higher.

Improving agricultural productivity, strengthening energy security, accelerating infrastructure projects, and pursuing governance reforms could help ease supply constraints and reduce the burden on monetary policy.